Performance Management 2018: Where Do We Go from Here?

Many large organizations such as Accenture Adobe, Google, GE, Goldman Sachs and Microsoft have been making significant changes to their performance management systems in recent years. A summary of some of these is shown in Table 1.

One general trend is a move away from a formal annual review done by a supervisor.

One general trend is a move away from a formal annual review done by a supervisor in favor of more frequent informal “forward focused” multi-source feedback on an “as needed” basis with feedback that is linked to organizational milestones such as project completion. An example of forward-looking feedback is Adobe’s new process called “Check-in” with feedback tied to assignment completion. Priorities are still set annually by Adobe leadership, then employees and managers translate these into accountability for employees. Adobe also abandoned forced rankings9,10.

Another trend is the use of real-time data for performance feedback.

Another trend is the use of real time data for performance feedback. Examples of “platform mediated performance management” include the custom made apps developed by Zalando, and General Electric’s “PD@GE” app that collects both quantitative and qualitative data using coaching/ developmental language. This app does not replace a performance conversation between a manager and employeee5.

Some organizations are reconsidering how they think about the distribution of performance in relation to performance appraisal and reward. Google, for example, is focusing more on employees at the top and bottom of the performance distribution rather than on fine gradations of performance of employees in the middle, and pay large bonuses for top performers6.

Abandoning ratings scales has not has not had universally positive results.

Rating Scales: Abandoning rating scales has not has not had universally positive results. A survey by CEB9 of more than 9,000 managers and employees across eighteen countries and found that scrapping ratings actually degraded the performance conversations employees had with their managers. Employees who previously received the highest ratings missed them most. Abandoning ratings also reduced the employees’ confidence that their pay was related to performance, increasing the perception that pay increases are more linked to favoritism. Without a rating to focus on in the conversation, Brian Kropp of CEB said, managers may feel it’s harder for them to deliver a clear message. The survey also showed that when companies drop ratings, managers spend less time on performance management. There have been reports of positive results, however, by such firms as Microsoft and Accenture, and it is possible that time is required for an organization to adapt to a system without ratings. It is also possible that in a performance management system with no ratings the real-time and analytics provide by apps can replace the ratings of more traditional performance management.

More frequent, less formal, milestone-related and multi-source feedback has been successful.

Frequency and Focus. According to the CEB11 survey the new face of performance management has reported success in terms of more frequent, less formal, milestone-related and multi-source feedback. It appears that creating a culture where employees share responsibility for gathering their own feedback is a step in the right direction. Interestingly, the new approaches are not expected to reduce cost of performance management but to yield a better return on investment.

It is likely that the trend towards incorporating platform-mediated data on an ongoing basis into the performance management equation will continue to grow.

Looking Down the Road. It is likely that the trend towards incorporating platform-mediated data on an ongoing basis into the performance management equation will continue to grow. The use of data derived from feedback apps has many advantages but is not without its own dangers. For one thing, employees with social media proficiency could game the system to inflate their feedback or deflate that of rivals. Another danger is that collecting real-time feedback data may negate the attempt to make performance management more participative and empowering by giving employees a “Big Brother is watching” feeling.

Employees with social media proficiency could game the system to inflate their feedback or deflate that of rivals.

Technology can enhance performance management but should not dictate the process.

Finally, there is a significant risk that organizations “put the cart in front of the horse” in their rush to move to platform-mediated performance management, adopting apps that are optimized in terms of technology but not in terms of an effective management process. Technology can enhance performance management but should not dictate the process, which may be why companies who have the resources to do so are creating their own custom-made apps. Organizations should be certain that apps acquired from third party vendors can be readily adapted to fit their jobs, organization culture and specific performance management requirements.

The future of performance management might be a two part model, with the first part, the appraisal side, based on platform-mediated data, the second part consisting of a future oriented coaching interaction between manager and employee.

In conclusion, a possible future of performance management is a two part model: the first part being an evaluation and appraisal component, the portion that drives HR decision making like promotion, pay raises and termination, being achieved via platform-mediated continuous, results oriented, multi-source appraisal data; The second part of the model being a future oriented coaching component for development, motivation and employee recognition that fosters a collaborative, empowering form of management.